tv [untitled] September 27, 2012 7:30pm-8:00pm PDT
determining whether or not that money is in fact being used for health care, the problem comes with the more loosely worded surcharges which are basically trying to state to the customers, we are going to be surcharging you for the added cost of doing business in san francisco. there's not going be a whole compendium of tax receipt of what that means, so then it's the job of our office or other prosecutors to try to say, well, it's consumer fraud because you're misrepresenting to the customer what you're using it for when in fact if you look at the loosely worded language on the receipt, you can't really say that in fact it was a misrepresentation and that's where the problem lies. >> well, i think -- i don't want to -- because we have a number of people that want to speak, but i think what the district attorney just said i think proves the point that i have been trying to make is that you may play with lang wamg, you may say we don't want them to do this or that but at
the end of the day, so long as the law allows them to collect money and not necessarily spend it and you don't define expenditure the way we were trying to do, this is going continue to be a problem because there are ways that they're always going to be able to manipulate the wording of the surcharge, so i think that's a problem and i think that the d.a. only confirms what we've always said. >> president chu? >> i had two observations as i compared our city attorney's response to the same question, our city attorney said, yes, consumer fraud is committed, you clarified the burden of proof required in the criminal context from my perspective, i think that makes sense, these
type of consumer fraud cases are pursued from our civil attorney, i wanted to make that first point, but secondly, i think what ms. crevette was saying, rather than having a surcharge for health care, they broaden that language and said it was a surcharge for the cost of doing business in san francisco, that's a very different set of issues and it might be a set of issue that is we may want to tackle at a later point but it gets us beyond the health care situation, it could be surcharge that businesses justify because of our city's living wage law, sick leave, health care and all the compendium or payroll tax, all of the variety of cost of doing business and this is why i think i understand from what you're saying, that would be harder to prosecute, i completely understand that. we may decide that's a problem, but i think that's what i hear you saying, you're not necessarily saying if the
surcharge was on health care and that money was not used for health care, that that would be -- to me, that's much more clear cut situation. >> that's exactly what i'm saying but i do want to say it's not theoretical, without going into the open investigation that we have, i will say that it was obvious to me as i think it was to the grand jury that they're moving to a broader surcharge language, at least a number of them are and that trend may continue, so that the ability to track exactly what they're taking in and what they're paying out and whether or not they're making any type of misrepresentation to their customers is more difficult. >> thank you, logs, any -- colleague, any additional questions. er >> we'll hear from the tax
collector's office, thank you very much. >> good afternoon, supervisors, san francisco treasury tax collector's office, our office was asked to respond to one finding and one recommendation regarding investigating the potential and the reporting of sales tax in accordance with these health care surcharges, unfortunately, those were not appropriate findings or recommendations because our office does not collect the sales tax, under state law, the board of equalization is the agency that collects sales tax, so while we do share the concerns of the civil grand jury, we will have to defer to the board of grand jury to their equalization efforts. er >> given that, maybe it's the appropriate time to ask the board of equalization to come up. michael lawrence. >> thank you.
>> thank you very much for being here today. >> good afternoon, my name is mike lawrence, i'm the district [inaudible] the board of equalization as you may be familiar with is tasked with the responsibility of collecting and maintaining the sales and use tax program within the state of california along with a whole host of other types of taxes including environmental fees, timber tax, property tax, cigarette, alcohol, i believe there's over 20 taxes that are involved. in response, i believe finding number 3 was what we were asked to respond to and on september 10 or a letter dated september 10 was provided to the grand jury. i don't know if that is -- if you've gotten that or what. i mean, so what i will do is summarize that letter and
explain what actions the board of equalization has done in regards specifically to the surcharge. sales tax applies to the sale of tangible personal property and the amount upon which that tax applies is the gross receipts under 6012 which is our reference, the gross receipts are anything that are charged so if you go into a liquor store and you buy some beer and it's 5 dollars, we want sales tax on five dollars, gross receipt ares also going be defined as any surcharges that are added and on a number of occasions, we do come across surcharges, for example, there may be a credit card surcharge, that is part of gross receipts and would be taxable, or in some cases, there is a fuel surcharge when the price of fuel becomes exorbitant, some businesses say, this is what
the price of fuel is plus there's a 10% surcharge, that is an element of %mpart of gros receipts and that is going be taxable. in the specific case of the san francisco ordinance for health care, we recognized early on when we first learned about it in 2008 and we knew it was unique to san francisco, now, our office covers san francisco and san mateo counties, but we knew the ordinance was unique to san francisco and we recognize that it would be incumbent upon us, it would be our duty to ensure that the retailers of which already 26 thousand retailers in the city and county of san francisco were aware that any surcharge would be taxable. this was done so that we audited after a three year cycle, we don't come in and unnecessarily penalize people because they didn't know something, so on a proactive
basis, that was our response and we sent out i believe in 2009, we sent a tax information bulletin to the 26 thousand permittees in the city and county of san francisco which would not only include restaurants but liquor stores, leasing companies, banks, anything that would require a seller's permit, so that notice was sent out in 2009 so that those retailers would be aware that if you're channeled any kind of a surtax, it's going be taxable and should be included as part of your gross receipts, whether it's 4%, 7% or a 50 cent surcharge, that's part of gross receipts, in addition to sending out the notification, we have an active audit program, when we select accounts for audits, we have a full spectrum in where we cover san francisco and san mateo county ts, it's all kinds of
businesses of which restaurants would be some of them, as part of the mandatory audit program, when an auditor does a restaurant in san francisco, he is required to determine if on the sales ticket or on any kind of an invoice, there's a surcharge, if that surcharge is not taxed, then that additional surcharge becomes part of the audit adjustments and becomes part of gross receipts. there's also a required comment so that in some situations, because it's my understanding that from -- anywhere from 1 to 19 employees, there is no health care fee, and also it could be that the health care fee is incorporated within the charges, you may not necessarily have a surcharge, there's a mandatory comment that the auditor investigated if there is a surcharge and how this was handled. i think also just in sitting here in the audience and
reading the grand jury report in preparation for this, it is of interest to us and we will request to see what can be done dealing with the office of labor standards enforcement to see who they have in terms of charging the surcharge so that we can work in conjunction to ensthaour that the sales tax is appropriately billed. if it is billed, there is no issue, if not, then certainly that would be something we would be interested in from that perspective. that is a summary of what this september 10th letter is and i hope i have addressed it so i'm open now to any kind of questions. >> thank you, any questions? terrific, we very much appreciate the information. >> thank you very much. >> okay, next we will hear from the city attorney's office. and then after the city attorney's office, we'll hear from the mayor's office.
>> john gib ner, deputy city attorney, i will be brief. we were asked to respond to three findings, numbers 5, 6 -- four findings, 5, 6, 7 and 12 and three recommendations, 1, 3 and 4, i believe olse responded to number 5, basically the same content as we did, finding number 6 regarding auditing by olse, we deferred to that department. finding number 7, that when a business tells customers it's going be using a surcharge for one purpose and uses it for a different purpose, that is consumer fraud, we agree with the grand jury on that, as you all know, our office has a long tradition of aggressively enforcing consumer fraud laws and of course we'll continue to do that.
finding number 12 is -- states that hra's may not be an allowable option nrords to the health care plan, as to several of the responses indicated, there are pending regulations in implementing the care act and once those regulations are issued, we will of course brief the board and all affected city departments under effect on our ordinance. as for the recommendations, they primarily -- recommendation number 3 asks the district attorney to open an investigation and of course we deferred to the district attorney on that, recommendations 1 and 4 are really policy questions as to potential amendments to the ordinance which of course are matters for the board and we are of course always available to provide advice on any
possible amendments. >> any questions, colleagues? okay, thank you very much, we'll hear from ms. terrell from the mayor's office, and after the mayor's office, we'll hear from the golden gate restaurant association which at that point we'll open it up to public comment. >> thanks for having me today, i did want to say thank you for the civil grand jury for taking on a complex topic, it's certainly on top of minds with the board, with the mayor and with a number of members of our community as well as the civil grand jury and i think rightly so given the changes that have happened. i did want to step back just for a minute to review some of the other stuff that preceded the civil grand jury report, in addition to the legislative change of mr. gold berg and supervisor chu outlined, the mayor also received an executive directive, he also
fully supported those legislative amendments and in partnership with that looked at collecting additional data around the hra accounts, around restrictions, etc.. i believe most of you are aware of that executive directive, i have a copy of that with me which i can certainly distribute that with you if you would like to see. okay. so, let me just quickly go through the components. directed olse to collect additional data from employers providing hra's with respect to what types of hra's are restricted what types of medical services or premiums that the employer did reimburse. he also asked olse to specifically track hra reimbursement rates distinctive from all the other
reimbursement accounts and to compare those accounts to reimbursement rates, he also decked olse to employ on which employers allow employees to draw down hra funds to cover health care. he asked our department specifically olse the office of small business and dph to conduct employee outreach around their rights and obligations under the health care security ordinance. and he called for a qualitative research effort to better understand employee barriers, real or perceived to accessing hra funds sparkly, that's something that we are working on doing that, i'm work -- working with many of the departments, privacy may be one that we would look at, but looking at it, i think ideally
within those employers that are doing a real ri good job of drawing down and doing those reimbursements, what are the best practices and also looking at likely would be within the pool of employers that olse has investigated, what are the barrierser because olse will be doing direct files of those employees regardless, so we'll have more findings in the coming months and i will share that with the board. >> he wanted to get a sense of and members of the board wanted to work from the foundation of data in addition to the anecdote tam information so we look forward to the 2011 report being a good baseline and looking at that comparison coming out of the 2012 report, i think the mayor does trust what businesses currently report and it really is that trust that verified approach
that we as a city espouse, we have many departments with data, and looking at creating avenues within departments for how they do that verification, and i think ultimately we will never be able to fully staff to do all the enforcement that we would love to do, so i think it's looking at how do we look at our resources wisely to do that and i think it's watching closely as olse does this report, and i think we did in this budget look at adding additional resources to them to help them with their work. and i think also not the least of which is also looking at how do we -- a lot of this policy work, and i'll step back for a minute, i think beginning with a very genesis of this policy, it's a collaborative process and i think we look at all the stakeholders in that process continue to being engaged,
through enforcement only, we'd have a low measure of success compare today the level of success we could have to the shared commitment to this policy, we look at this data and regulations to help in outreaching to their peers on how do we have better outcomes. i think it's also important the notification to have employees understand exactly what their options are and more importantly, where do they go when there are problems and doing a better outreach, when dph started with mra's in the first year, there was a low reimbursement rate, it was under 15% and you can see how that reimbursement rate has gone up significantly due to the strong outreach they have done, the hope is that will continue to happen and we will soon know if that worked or not. in respect to the mayor's grand
jury responses, i would propose to the supervisors that i just go through the findings and recommendations that other departments haven't responded to. in most cases, all of the cases, the mayor's findings are in accordance with the department's findings. >> on the enforcement piece, and i appreciate that the mayor trusts the business community and we want to trust the business community as well, and i do believe that one of the good things about these reports is it shows the vast majority of businesses are playing by the rules, we're going to hear from the golden gates restaurant association and i know they want their members to comply with the letter and the spirit of the law as well, but it's not just trust, you have to verify, so with the mayor's support augmenting the resources, olse, we have
audits, which right now, as they said, they're taking the information at face value, so would you support would , -- would the mayor support that, having independent information given to the city? >> i believe the mayor did support that in the budget he just signed and i think it's going be a telling factor, as we look over the next year. >> olse said, from what i understand, they're not going to be auditing these businesses so would you support that they aq the mayor be in support of that? >> yes, i think it depends on your deaf nation of audit, as complaints go in, let's audit those companies. >> independent verification of information. >> when they do that follow-up, that is their independent
verification. >> you would be support to do what they're doing but nothing beyond what they're doing? >> over the next dwraoer and as we look at the 2012 data, look at that in the context of how much more work do we need to do, have the results changed significantly as we hope they will, and also get olse's assessment on what further resources they might need. >> i would respectfully disagree, i don't think we have to wait and see that a report con firs many of us already know which is that this is a problem and i would hope that we would be supportive and we would get support from the mayor's office so that the verification is not complaint-driven because complaint-driven verification is reactive, it's not proactive, i think we need to be proactive and that's the question, would the mayor's office be commit today a proactive verification so we are not waiting until we know that something's a problem to do?
-- something? >> what the different innovative ways that we do outreach more extensively, to educate employers about what their responsibilities are and to educate employees of what their rights are. >> again, no answer to proactive verification. >> i will continue with the mayor's response to the civil grand jury. for finding number 2, i don't think the department responded to that one t city has not investigated related surcharges to determine whether employees are generating [inaudible] that we did disagree with that finding, the mayor supported and signed legislation amending the health care security ordinance and looked specifically at this issue, we are going to put a fine point to in the next year's report.
so, finding 11, employees with would or more employers would have two or more hra's for what constitutes medical expenses and with differing time limits, so we said partially disagree because there wasn't a partially agree answer, while there could be two or more hra's which is absolutely true, time limits are now standardized as per the 2011 amendment. finding 12, hra's may not be an allowable option in reading the requirements, partially disagree, just in that we simply don't know what the affordable care act will bring and we are watching very closely for when the rules and regulations are issued, and i think at that point as a city,
we'll need to sit down and quickly address what this means fwr the health care security ordinance. finding 13, financial incentive to retain hra funds could be a motivating force for employers to access employee funds to those funds. that certainly could be the case. i think the motivation behaind what that financial incentive is, we don't always know, it could be to retain more money for the profit of their business, it could be to augment employee's salaries or to hire more workers so i think there's varied motivating factors for companies. finding 14, by submitting personal medical invoices directly to their employers, employers are forced to reveal their private history, employee protection regarding health status and the majority of hra's are administered by a third party, if there is data
showing privacy concerns, then this should be become part of policy discussion. as i mentioned earlier, as we do our qualitative, our focus groups, this is what we oar going to ask people about to gain more feedback on that point and moving on to the recommendations, recommendation 1, disallow employers subject to the olse to pay for employer mandates and mandated paid sick days will not be implemented, the mayor's office supports businesses knowing how to cover their costs within their individual business model, our key focus is to be clear about removing consumer fraud issues, recommendation to re-- we supported the treasure and tax collector's response, it is outside of their pursue for
recommendation 3, we also support ted district attorney's response, for recommendation 4, disallow the employer hra option, the response will not be implemented, the hra while being used by a relatively small percentage is an important tool for businesses in respect to coming into compliance with the hdso, so we're trying to strengthen hra practices, putting a lot of attention and putting some sunshine on that, to ensure that employees are aware of the benefits available to them and employers make those benefits available and know what their responsibilities are under the health care security ordinance, recommendation 5, eliminate time limits for employees to use their mra funds, gph spoke to this and we deferred to their response. any questions? >> thank you, anything else?
>> colleagues, any additional questions? wonderful, thank you very much. we'll next hear from rob black from the golden gate restaurant association which voluntarily respond today the civil grand jury request. >> good afternoon, supervisors, i'm the executive officer, we represent a thousand member locations of restaurant locations throughout the bay area, we've been around since 1936, one of the oldest restaurant associations in the country. i'm here for a cum of things, one, i want to clarify that we are a non-profit trade association in way affiliate witched the city and county of san francisco, the grand jury statute, authorizing statute of penal code section 925 which instruct it is grand jury to inva*es gait and report on the operations accounts and records of the offices, departments or functions of the county, so the
fact that this report doesn't do that and that a non-profit was demanded responses to fill those inappropriate and outside the scope of what the grand jury should be doing w that said, since we were mentioned in the report, we did voluntarily as supervisor wiener said submit responses, and i'm happy to go through each of the responses, there were 11 requests for findings and then three recommendations. i will say our findings were very similar and also on the recommendations side to those of the various departments. i think where i would -- and i'm happy to go throh them in detail if you would like, but where i would really i think focus the most would probably be on those recommendations, recommendation 1, disallow the
employers from adding surcharges to pay for health care costs, and paid sick days, we believe that is inappropriate, we would disagree with that recommendation, we would not if the bank of america uses at&t's to offset costs, we wouldn't say they would have to offset at&t fees, similarly, we don't believe it's appropriate in legislative approach to do that with surcharges on menus, recommendation 4, disallow the use of employer, the hra option, we disagree with that very strongly, in fact, when the golden gate restaurant association did litigate this case regarding whether or no